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  1. 1. E-Mail Marketing and the CAN-SPAM Act of 2003 Jeffrey S. Galvin, Partner Downey Brand LLP Note: This presentation is meant to provide only a broad overview, not legal advice as to your particular circumstances and obligations. We urge you to consult with an attorney to discuss your compliance questions. ©2004 Downey Brand LLP.
  2. 2. Growth of E-Mail Marketing • Companies of all sizes increasingly use e-mail marketing • DMA Survey  45.8 million Americans made at least one purchase in previous 12 months in response to e-mail  9 percent of e-mail users made a purchase in response to an unsolicited message
  3. 3. Opportunity for Unscrupulous Marketers  200 million e-mail addresses for $150  Little/no marginal transmission costs  Profitable at low response rates • Business 2.0 estimate: $20 purchase from 1 in 2,000 recipients can generate $1 million/month  Easy to conceal identity and location
  4. 4. Spam Swamps E-mail  Spam Speeds Past Namesake • 6 billion cans of SPAM® sold 1937-2002, with one can consumed in the U.S. every 3.1 seconds • over one trillion spam messages sent in 2002  Brightmail analysis • 58% of external internet e-mail is spam as of 12/03 • up from 42% in 1/03
  5. 5. Costs to Businesses  Loss of valuable messages  Employee productivity  Management time for IS departments  Loss of bandwidth and storage space  Liability for hostile environment claims  Ferris Research: $1.2 million cost to a 10,000 person organization
  6. 6. A Decade of Increased Marketing Regulation  Telemarketing • Initial FTC/FCC rules • National Do Not Call list  Unsolicited Faxes • Initial FCC rules • New rule for 1/1/05  must have prior written consent even with established business relationship
  7. 7. Initial Regulation of E-Mail  Federal Approach • Focus on deceptive messages  “likely to mislead” standard • No opt out or format requirements  State Approach • Patchwork of inconsistent/changing rules • Compliance difficulties • Weak enforcement
  8. 8. California Law Before CAN-SPAM  First Effort (starting 1992) • Must include “ADV:” or “ADV:ADLT” in subject line • Must create opt out mechanism • Must honor opt out requests  SB 186 (was to take effect 1/1/04) • Would have covered all messages sent to/from CA • Must have express consent or preexisting business relationship • Stiff penalties ($1,000 per message) • Citizen suits (with attorneys’ fees)
  9. 9. CAN-SPAM Act of 2003  Senate Bill 877 • Signed by President 12/03 • Took effect 1/1/04  Understanding the Law • What does it cover? • Who enforces? • Keys to compliance
  10. 10. Scope of Federal Law  Covers any e-mail, sent to one or more recipients, “the primary purpose of which is the commercial advertisement or promotion of a commercial product or service,” including content on a commercial website  Does apply to existing business relationships  FTC must issue regulations to clarify “primary purpose”
  11. 11. Exception for “Transactional or Relationship Messages”  To facilitate/complete/confirm a pre-agreed transaction  To deliver goods or services under a prior agreement (e.g. software update)  Provide warranty/recall/safety/security info regarding a prior purchase  Notices regarding ongoing subscription, membership, account, loan where sender offers the product/service  Information directly related to employment
  12. 12. Criminal Liability  Aimed at pattern of “predatory and abusive” practices: • Unauthorized use of another’s computer • Use of computer to relay/retransmit with intent to deceive as to origin • Falsification of “header” information • Falsification of identity in registering for e-mail accounts or websites used to send messages • Falsely claiming entitlement to use internet protocol addresses
  13. 13. Criminal Liability  If message depicts sexually explicit conduct, sender must include “clearly identifiable marks or notices” to be prescribed by the FTC (no later than 4/04), to facilitate identification and filtering
  14. 14. Criminal Sanctions  Up to 5 years of jail per violation  Fine  Forfeiture of proceeds, equipment, software
  15. 15. Civil Liability  For less serious violations of the law  Penalties and damages  Injunction
  16. 16. Civil Liability – Don’ts  No false/misleading header information (applies even to transactional and relationship messages)  No deceptive subject headings • Likely to mislead reasonable recipient • Clever teasers may be illegal
  17. 17. Civil Liability – Do’s  Include return e-mail address or other internet-based mechanism to accept opt out requests • May use opt out menu • Must honor opt out requests in 10 bus. days • Can’t sell/exchange/release addresses of opt outs  Identify message as an advertisement or solicitation, unless recipient has given prior affirmative consent
  18. 18. Civil Liability – Do’s  Provide “a valid physical postal address” for the sender  Monitor activities of any e-mail marketing vendor • Express liability if vendor falsifies transmission information • Implied liability if vendor violates other provisions of law
  19. 19. Who Enforces?  Federal Trade Commission  Other federal agencies  State attorney generals  ISP providers  Probably not spam recipients
  20. 20. Preemption of State/ Local Laws  Preemption of anti-spam laws except those that prohibit falsity or deception  Does not affect state laws not specific to e-mail  SB 186 opt in requirements preempted before they took effect  No preemption of ISP policies, which may be stricter
  21. 21. Next Steps at Federal Level  FTC to consider adoption of national do- not-email registry (implementation possible by fall 2004)  FTC to study rewards for tipsters  FTC to study mandatory identifiers in subject lines, including “ADV”  FTC to adopt refining rules  FCC to adopt rules by 9/04 to limit unwanted mobile service messages
  22. 22. Compliance Keys  Internal audit: assess extent to which external communications fall within law  Develop template that includes required information (e.g., opt out invitation, physical address, [advt. disclosure])  Train and retrain marketing personnel – watch for FTC rules
  23. 23. Compliance Keys  Ensure compliance with opt out requests • Centralized unsubscribe list? • Difficulties where marketing is fragmented  Develop and Maintain Integrity of Lists with Affirmative Consents • Messages need not be labeled as an advertisement or solicitation  Consider use of e-mail service provider